The Government has now published its response to the off-payroll working rules consultation and associated draft Finance Bill clauses. Going forward, the rules for the Private Sector and Public Sector will generally be aligned in treatment, other than for small Private Sector businesses which will be exempt.
The proposed changes will take effect from the 2020/21 tax year and the consultation response confirms that all payments to workers on or after 6 April 2020 will be caught by the new rules.
Whilst not absolutely clear, the implications appear to be that where currently a ‘fully outsourced’ Public Sector arrangement means nobody in the supply chain is impacted by the rules, going forward, for both the Private Sector and Public Sector, the next entity in the supply chain will become the end user and must apply the rules.
Currently, the employment intermediaries or ‘IR35’ rules stipulate that where an individual provides services to an end user in such a way that they would be considered to be an employee of the end user but for the existence of an intermediary such as a Personal Service Company (PSC), it is the PSC which must make a determination of employment status and account for PAYE and NIC as appropriate. The proposed change is that the end user will have the responsibility to make the status determination and the fee payer will have to operate PAYE and NIC as required.
The consultation response published on 11 July 2019 gives further detail on the operation of the proposed changes in practice. It has been confirmed that the Companies Act 2006 definition will be used to determine if an end user is within the scope of the new rules, with ‘small’ companies not included. The Government has confirmed that for unincorporated businesses a simplified test will be applied, with the rules applying in the tax year following any calendar year in which a business’ turnover exceeds £10.2m. Please note, the size test is applied to the end user and not to the intermediary.